Keeping it legal

In yesterday's blog I pointed out that you will always be disappointed if you have unrealistic expectations of your accountant. A good accountant will help keep his/her clients' tax bills down but will discourage you from doing anything illegal.

If you're wondering however, here is my simple analysis:

It is legal to:
- Legitimately minimise your tax liabilities;
- Claim all available allowances and reliefs;
- Claim tax relief for expenditure incurred “wholly and exclusively” for business purposes;
- Plan your affairs to keep your tax liabilities as low as possible within the law.

It is illegal to:
- Deliberately and/or dishonestly evade paying tax;
- Claim tax relief for non-business expenses;
- Fail to include all taxable income in accounts/tax returns.

Potential consequences of illegal activity:
- Revenue investigations;
- Back taxes;
- Interest on late paid tax;
- Penalties (up to 100% of tax);
- Wasted time, hassle, professional fees, and
- If you’re very unlucky, ill-advised or stupid - prosecution and prison.

Sometimes there may be a fine line between the two. More often than not, there's a big gap. One is honest. The other is dishonest.